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The Fastest Bear Market Ever

March 13, 2020
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The historic volatility continues, with the Dow Jones Industrial Average officially setting its fastest move from a new all-time high to a bear market (down 20% from the highs) in the 124-year history of the index. It took only 19 days for this to take place, which is far and away the new record.

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Not to be outdone, the S&P 500 Index is set to close down 20% from all-time highs today, doing this in only 16 days. Again, as of the time we are writing this blog, the S&P 500 is in bear market territory, but there always could be a chance for a late-day rally.

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“From major sports postponing their seasons, to travel bans to Europe, the economic impact of the coronavirus is growing exponentially with each passing day,” said LPL Financial Senior Market Strategist Ryan Detrick. “Markets are pricing in a potential recession and inevitable second quarter slowdown, but it is all about expectations. Should the virus be contained and the worst-case scenarios not materialize, now could be a nice opportunity for longer-term investors.”

Last, one of Warren Buffett’s most famous quotes is, “Be fearful when others are greedy and be greedy when others are fearful.” We’ve seen many signs of extreme fear the past few days, but the CNN Fear & Greed Index hitting 1 earlier today is quite a historic level of fear. This proprietary indicator looks at multiple inputs (like put/call ratios, momentum, and volatility), but on a scale of 1-100, this morning’s 1 is the lowest level ever seen, besting the 2 it hit at the lows in December 2018. From a contrarian point of view, this could be quite meaningful.

Source: CNN Business 03/12/20

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This is a very fearful time, but LPL Research is here for you and we will continue to share our market views every day in an objective and professional way. Thank you for reading.

 

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